Micex Index companies from OAO Rosneft, Russia’s biggest
oil producer, to OAO Sberbank, the largest lender, paid record
dividends in the past year and will boost distributions by 16
percent in the next 12 months, the most among the four biggest
developing economies, analysts’ projections compiled by
Bloomberg show. The gauge’s 3.8 percent estimated yield compares
with 3.1 percent for the MSCI Emerging Markets Index. The gap
hit a three-year high of 1.1 percentage points in June.

While Prosperity Capital, the largest foreign investor in
Russia’s financial markets, expects bigger payouts will push
stocks higher, Putin’s intervention also reminds shareholders of
his willingness to interfere with public companies. Unlike the
government-imposed liquidation of OAO Yukos Oil Co. six years
ago, this push shows a more market-friendly Putin, according to
Matthias Siller, who helps oversee about $4 billion as a money
manager at Baring Asset Management in London.

“The indications I get from higher dividend payout ratios
is that the Russian government is more serious about delivering
on its promises of market reforms and better corporate
governance,” Siller said in a phone interview.

BRIC Dividends

The 25 stocks in the Micex paying cash dividends this year
returned an average 14 percent in Moscow trading, versus a 12
percent drop for the five non-payers, data compiled by Bloomberg
show. In the Standard & Poor’s 500 Index, companies with
dividends lagged behind by about 2 percentage points on average.

The Micex payout will climb to 56 rubles a share in the
next 12 months, according to more than 200 analyst estimates
compiled by Bloomberg. The 16 percent projected growth rate
compares with 15 percent in India, 5 percent in China and a 16
percent decline in Brazil, forecasts compiled by Bloomberg show.

The Russian index fell 1 percent to 1,515.30 today in
Moscow, paring this year’s gain to 8 percent. That compares with
a 10 percent advance for the MSCI emerging-market gauge. The
Micex is valued at 5.8 times reported earnings, the lowest level
among benchmark equity gauges in 45 developing and advanced
countries tracked by Bloomberg. The MSCI emerging markets index
trades for 13 times profit.

Asset Sales

Putin, 59, is seeking to increase market values before the
government sells stakes of state-controlled companies, according
to Dmitri Kryukov, a founding partner at Verno Capital, a
Moscow-based hedge fund.

Russia plans to raise 380 billion rubles ($12 billion) from
state asset sales next year, the Finance Ministry said in a
budget plan published on its website July 18. That would be the
biggest amount for any year on record, according to Chris
Weafer, chief strategist at Troika Dialog, the investment bank
owned by government-controlled lender Sberbank.

Sberbank, which more than doubled its dividend for 2011,
climbed 21 percent in Moscow trading this year through
yesterday. Russia’s central bank began selling a 7.6 percent
stake in the Moscow-based lender yesterday. Bids will be
accepted through today, according to a statement from the
nation’s bourse.

Relative Yields

In the 1990s, Boris Yeltsin’s government pledged some of
the nation’s biggest companies as collateral for loans from the
richest business people to plug a budget shortfall. The loans-for-shares program eventually put the companies in the hands of
the lenders, known collectively as “oligarchs,” because the
government never repaid the debt. Six years ago, state-run
Rosneft raised more than $10 billion through an initial public
offering.

Russian bond yields have fallen relative to stocks, with
government ruble debt yielding about 3.5 percentage points more
than the Micex Index. The average gap was 4.5 percentage points
during the past five years, according to JPMorgan Chase & Co.’s
GBI-EM index.

Rosneft said in a statement today the company will more
than double its dividend for 2011 following a request from
Putin. The Micex rallied on July 10 after the Russian president
said at a meeting in Moscow with executives and government
officials that energy companies, which account for about 54
percent of Russia’s stock market value, should consider boosting
dividends.

Private Payouts

Moscow-based Rosneft, majority owned by the government,
plans to pay out at least 25 percent of net income under
International Financial Reporting Standards to shareholders for
2012, the company’s press service said in an e-mailed response
to questions from Bloomberg News on Sept. 5.

Russian state-owned companies should “in most cases” pay
25 percent of profit as dividends, Deputy Prime Minister Arkady
Dvorkovich said at a conference in London on Sept. 11. Dmitry
Peskov, a spokesman for Putin, declined to comment.

Companies not controlled by the state also are increasing
dividends. Payouts at OAO Magnit, the Krasnodar-based food
retailer, may jump 24 percent next year and 23 percent in 2014,
according to the average of analysts’ estimates compiled by
Bloomberg.

OAO Novatek, controlled by billionaires Leonid Mikhelson
and Gennady Timchenko, will increase its payout to 11 rubles a
share in 2014 from 6.8 rubles this year as earnings surge 59
percent, analysts’ projections compiled by Bloomberg show.

Slower Growth

“Companies are starting to realize that paying dividends
and making investors happy leads to increased return on
investments and better share performance,” said Vladimir
Bragin, who helps oversee about $2.6 billion as the head of
research at Alfa Capital in Moscow.

Some Russian companies have boosted dividends in part
because they’re running out of new projects to lift profit
growth, said Mikhail Akramovsky, who manages $850 million in
Russian assets at Allianz Rosno Asset Management in Moscow.

OAO Gazprom, Russia’s state-controlled natural gas
exporter, boosted its payout to 8.97 rubles a share this year
from 3.85 rubles in 2011, even as analysts’ estimates show the
Moscow-based company probably will post a 10 percent drop in
earnings this year, according to data compiled by Bloomberg.
Gazprom’s stock has retreated 1.1 percent in 2012.

Bigger dividends make sense when companies “have reached a
level where significant additional growth is almost
impossible,” said Akramovsky.

Yukos Bankruptcy

Gazprom plans to sustain “high” dividends, and its
payouts have supported the shares, the company’s press service
said in an e-mail on Aug. 31. The gas producer’s dividend policy
complies with government requirements, Andrei Akimov, a board
member, said in an April 27 conference call with analysts.

Dmitry Postolenko, who manages $110 million in Russian
assets at Kapital Asset Management LLC in Moscow, said he’s
avoiding many companies with government links because political
interests may curb returns.

Yukos, once Russia’s largest oil producer, was bankrupted
during Putin’s presidency in 2006 after the government claimed
about $30 billion in back taxes. Mikhail Khodorkovsky, the
former chief executive officer, was jailed for fraud and oil
embezzlement, charges he says were linked to his financing of
opposition political parties.

“We’re trying to avoid many state-owned companies,”
Postolenko said in a phone interview. “We try to invest in
companies with a transparent investor body where investors are
genuinely driven by business and not political interests.”

Equity yields are rising in Russia as dividends increase
faster than stock prices. The combined payout for Micex
companies jumped 42 percent during the past 12 months to 48
rubles per share, compared with a 1.3 percent gain in the
index’s price, data compiled by Bloomberg show.

That’s a turnaround from 2009, when yields rose because
share prices sank more than dividends as the nation’s economy
contracted. Russia’s gross domestic product may expand 4 percent
this year and 3.9 percent in 2013, according to July estimates
by the Washington-based International Monetary Fund.

“Eventually, dividends will help Russian stock
valuations,” said Mattias Westman, who oversees about $4
billion in Russian assets as chief executive officer of
Prosperity Capital in London, a company he says is the biggest
foreign portfolio investor in Russia. “Once they get a higher
dividend yield, these stocks will feel more real, people will
probably become more interested in investing in them.”